It would mean participating households would no longer be beholden to multi-billion pound, global companies to heat and light their homes.

But unlike bigger suppliers, community groups would not have to make big investments in energy systems, technology and infrastructure.

Ovo hopes that around five million consumers could be getting their energy from 500 new community-based energy suppliers by 2020.

The scheme is set to capitalise on Britain’s movement towards alternative forms of energy, such as solar and wind energy.

Local authorities, housing associations and community groups would buy energy from private suppliers, such as wind farm owners and those with PV solar panels, and sell it back to neighbourhood residents at a discounted tariff.

If communities do not have enough privately owned energy for all its resident customers, Ovo would top up the supply with their own at a discounted rate.

Ovo is already an energy supplier in its own right, and so arguably would be creating hundreds of competitors to itself.

But founder and chief executive Stephen Fitzpatrick said he thought it was inevitable that the energy market would start to move towards this type of model, so Ovo has decided to get on board at the start.

‘The era of big energy is coming to an end,’ he said. ‘We think change is inevitable,’ he added, ‘and we want to be first’.

Community energy groups have taken off in Germany, Ovo said (Source: OVO)

While economies of scale have worked for the energy industry in the past, Ovo argues that as the energy market changes, this will no longer be the case.

‘Energy types such as coal benefit from economies of scale,’ Mr Fitzpatrick explained. ‘It pays to buy in bulk. But wind and solar lose efficiency with scale – it actually makes more sense to be closer to the point of demand.’

He argued that even a few years ago this business model would not work because the technology would have been too expensive to manage the data of so many small suppliers.

While community ownership of renewable energy is just taking off in the UK, in Germany it is very well established

But as 'cloud' technology - storing digital data remotely - gets less expensive, this will become an increasingly viable option.

Secretary of State for Energy and Climate Change Ed Davey welcomed the move.

‘It’s
important we see more players in the energy market to ensure better
value and so big companies know they can’t take customers for granted.'

He added: 'I can’t predict if it’s going to work – it’s your money on the line to take that risk. I wish you every success.’

Ovo
believes the new model will work because households are more likely to
trust their local authority or housing association to provide it with
energy than a big supplier.

Recent
YouGov research commissioned by Ovo revealed that three times more
people believe they would get a fairer deal from a local community
energy supplier than a big energy company.

Furthermore
it believes a local alternative may appeal to households who have not
ever switched supplier, but who may be convinced to do so if it meant
switching to a local name they already trusted.

The
transition to local suppliers has already taken off in Germany in
recent years. As many as 41 per cent of households in Germany now buy
their energy from local authorities and independent suppliers.

The majority of respondents to Ovo's survey said they would prefer to buy their energy from a local supplier conducting a community energy project (Source: OVO)

Smaller energy suppliers have been causing a stir in the UK energy market over the last few weeks, regularly announcing deals that top the best buy tables.

The ‘challenger’ energy suppliers First Utility and Ovo both announced one-year fixed-rate deals for combined gas and electricity of less than £1,000 a year.

The Ovo Communities scheme is 'open for business,' Mr Fitzpatrick added. Households who are interested in the scheme and would like to encourage their local authority to consider becoming a supplier can register their interest on its website.

IS IT TIME TO SWITCH? HOW TO DO IT YOURSELF

Energy
tariff prices are in a constant merry-go-round with suppliers battling to pinch customers - you - from each other.

Shrewd consumers can take advantage of
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Suppliers offer their cheapest rates via online tariffs so if you're ready to switch, it will certainly pay to do so.

If you are one of the millions of
people who have NEVER switched (i.e. stuck with your original
supplier), then you will DEFINITELY save a big chunk of cash, possibly
as much as £300 a year.

Prices
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will depend where you live. You only need to be interested in the tariff
that is going to be cheapest where you live, so do your own comparison to find the best price.

For full details of how to switch your provider and where to find the best deals check out This is Money's guide